Solavei signs up 250,000 members and expands into new areas: Company now on $67M revenue run rate

It’s been just one year since Solavei emerged on the scene with a referral-based marketing approach for selling cellular service, tapping into its users to help spread the word on the $49 per month plans.

And now we’re getting a glimpse into the success that the controversial and heavily-funded company — led by former Motricity CEO Ryan Wuerch and backed by the likes of former AOL CEO Jonathan Miller, Amazon Kindle VP David Limp and others— has achieved in the past 12 months.

The company, which piggybacks on the T-Mobile network and allows users to earn free cellular service plans by signing up friends, co-workers and family members, said that it has attracted 250,000 members since its launch last September. It is also on a annualized revenue run rate of $67 million, based on revenue figures from Sept. 2013. Today, the company is launching a new program in partnership with First Data to build on that momentum, a new marketplace for products and services beyond cellular service.

Earlier this year, Fierce Wireless reported that Solavei was looking to top $100 million in revenue in its first calendar year, so the $67 million run rate indicates that it is a bit behind those goals.

Ryan Wuerch

Still, a $67 million run rate for a company that’s been operating for 12 months is nothing to sneeze at. (By comparison, Zulily, which just filed to go public, posted revenue of $18.3 million in its first year). (Editor’s note: This post has been adjusted to better reflect the time period of the revenue run rate).

The new Marketplace program is being launched in partnership with First Data, marking a new way for Solavei members to market everything from high-speed Internet to cable plans to financial services to household goods. In each case, there will be a referral compensation model attached, a concept which has drawn the ire of some who negatively view business models in which members are rewarded for signing up acquaintances.

“The explosive growth in our member base in our first 12 months validates our business premise and belief that social commerce will redefine distribution in the coming years,” said Wuerch, founder and CEO of Solavei. “We’re making people’s everyday purchases more affordable by shifting the large advertising dollars usually spent by brands to our members —directly rewarding them for sharing the value of Solavei with their friends and family.”

Solavei has signed up 16,000 merchants, including Target, Old Navy, Subway and Starbucks, for the new marketplace program, with members able to use a Solavei card to purchase items at a discount. Furthermore, money is directly deposited on the Solavei card when members refer friends to a specific service or product, with those members then able to use the cards at ATMs and to make purchases anywhere Visa is accepted. Solavei members already have the cards, and have been receiving compensation when they use them.

The marketplace is a bold step by the company — which has raised $25 million in funding — to expand beyond its cellular service offering.

Here’s an overview of new marketplace.

John Cook is GeekWire's co-founder and editor, a veteran reporter and the longest-serving journalist on the Pacific Northwest tech startup beat. Follow him @johnhcook and email john@geekwire.com.

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Comments

You do know that a $67M run rate is different than $67M in the first year, don’t you?

johnhcook

Thanks. Yeah, that was my error and a bit unclear in the headline and body. I cleaned that up a bit to make it more clear. Thanks for pointing that out.

Charles Dyer

Congrats Solavei! You guys are crushing it. Anytime you can get 250k consumers to open their wallet and pay $50/month is awesome. What might be more impressive is how they’ve leveraged their social model and have given back significant money back to its subscribers for their referrals!

Kerry Baker

250,000 customers paying $49 per month would be an annual run rate of $147 million. So maybe Solavei signed up 250,000 customers, but the math of $67 million suggests that the current customer base is closer to 114,000. Churn is a bitch.

Jason Asher

Obviously, Solavei didn’t start at 250,000 customers day 1, revenue has ramped up each month… It doesn’t take a math wizard to figure that out.

Kerry Baker

My point wasn’t clear — let me state it this way, round number estimates for year 1:

Headline could have been, “Solavei loses more customers than it keeps in first year”.

Or, if $67 million is run rate after year 1, then is it safe to estimate that year 1 revenue was about half that, or about $34 million? If so, another headline could be, “Solavei misses massively — revenue one-third of goal”

Please point out logic flaws.

Jason Asher

Well your “calculation” is wrong… Where do you see thare has been 115K deactivations?? Thats insanely incorrect.

What don’t you understand about going from $0 to $67 Million in Revenue Yr 1?

You following me here?? … The math you’re doing assumes Solavei started day 1 @ 250,000 members & collecting $49 for 12 mos. When actually it has grown 1 member at a time. We are now enroling about 1500-2000 member per day!

David Bruerd

… GREAT point Jason. :)

Kerry Baker

The article does not state $67 million revenue in year 1. It states an annualized run rate of $67 million based on September 2013. To me that means that the revenue made in the month of September is multiplied times 12 to get an annualized run rate of $67 million. So, in September the revenue was $67mil / 12mos = $5.58 million. And if customers are paying $49 per month, then there are $5.58 mil / $49 per customer = 114,000-ish customers. Therefore, churn has happened, which is a normal part of the wireless industry, but suggests a pretty high churn rate in this case.

If we disagree on what “annualized run rate” means, then our calculations will not reconcile. What does it mean to you?

Vince Stagbaugh

You can call it “churn” or “attrition” or whatever you want to name it. All I know is that the percentage of people sticking with Solavei versus that of other biz opps like vitamins or cosmetics is WAY higher.
People can argue all day about this but all I know is that I have 5 cell phones in my family and they are FREE every month. Compare that to the $4,300 I was previously paying annually to AT&T and I’ll take it.
Check out the mobile49er site to find out how you can do the same. It’s not rocket science!

Jason Asher

hey Brainiac, read the first comment to this article…the author of the article, John Cook basically states he’s sorry for calling it a 67 million dollar run rate when it was actually 67 million in revenue. Some people… have no attention to detail … it really shows ignorance & lack of due diligence concorning the subject. I think u just like to drink the haterade & hear yourself babble.

James

Agreed Kerry. Such a huge discrepancy at least calls for a clarification in the article. One day these reporters will begin doing basic math to cross check numbers.

johnhcook

Thanks for reading. I did clarify the post above, putting an editor’s in bold in the story, and I spoke directly to the folks at Solavei to make sure that I understood clearly what is going on here.

Just to be clear, the company is on a $67M annualized run rate, based on the month of Sept. 2013. The story reflects that, so not sure what your beef is.

Kerry Baker

Thanks John. Makes sense — it means the company made $5.58 million in Sept 2013. And since we know it started at $0 a year earlier, actual revenue for first 12 months would be the average of the starting run rate ($0) and the ending run rate ($67 million), about $34 million. I’ll come back to this number in a bit.

Returning to the question of customer counts, in John’s article he references a Fierce Wireless article (it is linked on Solavei’s site under ). Here is a copy-paste from that article:

“Wuerch provided an update on Solavei’s progress in the eight months since it launched. He said the company currently counts 180,000 members, of which 100,000 are considered “active” users (those who remain active after 2 months of service).”

Keeping that same attrition proportion, then the 250,000 number suggests 138,889 active users. So, my estimate of 115k earlier in this thread was too pessimistic, but not wildly far off.

So 138,889 active users paying $49 each month would give a monthly revenue of $6.8 million. That doesn’t perfectly foot with the run rate calculation of $5.58 million for Sept 2012, but again not wildly far off.

Now that the customer numbers and the revenue numbers are telling a rational story (meaning, the math that goes from revenue-to-customers and customers-to-revenue), a clearer picture of company performance emerges.

Returning to the actual 2013 revenue of $34 million, I’m a little curious about the business model on the cost side. In a separate thread here Mr. Hayse notes Solavei has paid out $14 million (and in the Fierce Wireless article, Wuerch said $10 million at 8 months, so $14 million makes sense).
The other big cost driver must be the transport fees to T-Mobile. This would take me longer to model accurately, but back-of-napkin math based on voice costs of $0.005 per minute and data costs of $0.01 per megabyte (these are the big movers of the model, so need to improve this part). Users talk about 800 minutes per month and use 650MB of data, let’s estimate. Using the customer numbers established earlier, this quick-and-dirty calculation suggests Solavei paid T-Mobile $8.75 million in transport. This could be wildly high or low, but is a starting point.

And perhaps an ending point as well. I can infer that this discourse is tedious for many on this thread, so will stop offering any more calculations and analysis on this company’s performance.

http://www.facebook.com/RAYHAM2 Raymond Hamilton

Kerry you are wrong. Your long tiresome post is proof positive that you do not know what you are talking about.. Something else to consider that you do not bring into the equation is that Solavei is a Social Commerce company not a wireless carrier. You are going to come down on the wrong side of business history.

Aaron Dunn

HEY FOLKS! Aaron Dunn here. I’m no savvy tech guy or internet guru. I’m just a regular’ol guy. So to some of you folks, my words may seem a bit insignificant. But um, if I do say so myself, Solavei is the best mobile cellphone provider out there.

The Market Place Program was only just launched in September. So, if Solavei “lost” more consumers in their first year, they are certainly going to rebound back very nicely with that new addition to their continued success. And by golly, I plan on being a big contributor to it.

What other company is doing what Solavei is doing for it’s consumers? Tell me, please. So that I may go and examine the facts for myself.

Ryan Floyd

We thank God for Solavei as we have not had a cell phone bill over the last year and are looking forward to saving even more with solavei marketplace. We love helping others eliminate their cell phone bill too!

Douglas Hayse

Might have also included that they have paid out over 14 million to its members since that time as well. I am liking getting 15% off at starbucks just for doing something almost everyone is doing paying my phone bill. Which is how posted this. Solavei saves people money period.

Bjw

reading all the comments on here! either way 67 million in 1 year is awesome! How many other companies do you know that has made 67 million dollars there first year?

Update: Solavei betrayed its members and those who have recently signed up. The promise of UNLIMITED 4G SERVICE for $49 per month has been revised and we are being coerced to accept lesser service (2G) because they researched usage and saw that not all were using nearly the 4G they had given to us. As a result of their research, they have come up with 4 plans… Not at all the original promise and they are spinning it like madmen because the masses have spoken and communicated that we have been betrayed! An analogy would be that you went to a dealership and worked out a deal for a Porsche. Agreed, paid for, and promised! You go to the dealership and are given a VW and told that research showed that you could do with a lesser product… for the same price… Solavei will fall for this! Go to their website. Go to their forums online. Feel the betrayal, feel the anger, the hurt – Solavei has broken a promise and they don’t care! They have totally disgusted me and many of the people like myself who were promised one thing and given another thing… The will FALL!!!

JP

good luck buddy. Solavei won’t fall. In fact over 371 thousand people had already joined. How about you go pay VERIZON 2000 per year making the CEO richer?